Virginia, US

On 30 July 2018, the Official Journal of Luxembourg published a law ratifying the new bilateral agreement on Social Security between Luxembourg and China, signed last year on 27 November 2017.

The agreement takes effect from the first day of the fourth month following receipt of the last notification of its implementation into national law.

WHAT DOES IT MEAN FOR YOUR BUSINESS?

In general, according to the principle of territoriality, social security contributions should be paid in the country where the work is performed. Between countries where no totalization agreement exists, this may give rise to risk exposures; high costs due to double liabilities; administrative burdens, such as host country compliance; etc.  

The new agreement establishes that employees insured in Luxembourg or China, regardless of their nationality, who are working in one country and are sent by their employer to work in the territory of the other country, will continue to be subject to the legislation of the first country for up to 60 months. A further extension is possible, subject to the agreement of both countries’ competent authorities.

It is important to note that the new bilateral agreement only applies to pension legislation(s). It is not a totalization agreement, as it does not contain any provision on the accrual of insurance periods between Luxembourg and China for the entitlement to benefits. It only includes the unlimited exportability of social security benefits granted on the basis of the social security legislation of one country to residents of the other country (or of a third country).

HOW WE CAN HELP

If your company moves personnel between Luxembourg and China, it is worthwhile to examine to what extent your assignees may benefit from the provisions of the new agreement, and how this will impact your international mobility population, in general.

The Fragomen Social Security team can help you to plan ahead and ensure social security compliance from day one, taking into account both immigration and social security requirements at the same time. For any social security related question, please feel free to contact us at fragomensocsec@fragomen.com.

Interested in reading more blogs on social security agreements? Read these blogs on US-Brazil Social Security Totalisation Agreement and Social Security post-Brexit in the UK and EU.